What is your product?
Early on, it’s important to define your product. Developing your value-proposition can communicate the main reasons a customer should buy your product and how it solves a problem or need they may have and improves their life. The value-proposition “promise” also communicates why your customer should buy your product instead of the competition’s. This promise describes your product’s benefits to bring new customers to your business and helps to retain existing ones.
Is there a market for your product?
You also need to know if there is a market for your offering, besides your friends and family. You’ll want to fully cover your costs to make and sell the product and pay yourself along the way. After all, the purpose of a business is to sell products or services, not to make products that might sell. Finding out what people will buy and what they’re willing to pay begins with a market assessment.
The first step is market research. You must understand what consumers need and want, who makes up your target market, and how to reach them. It also involves learning about specialty food trends. What types of products are flying off store shelves? What foods are practically timeless? What’s up and coming?
Some food products fill a niche or hole in the general market. Others appeal to a broad audience or improve upon existing products. Some are trendy. Are you thinking of selling at farmers markets, to consumers directly through an online platform, or wholesale to farm stands or grocers? Are you hoping to take your product to a broader regional or national audience? Or maybe your product is a great fit for selling wholesale to restaurants or caterers. Think about where to sell it from the beginning, so that you can chart a course to get there.
Know your customers
When you have a new product idea, you need to gain a sense of who will buy it and why—this is your target audience. Spend time learning everything you can about your potential customers. You want to understand demographic information including age, ethnicity, gender and location, buying habits, economic profile, as well as psychographic information that focuses on motivations, beliefs, and priorities.
Gathering this information is part science and part intuition. You want to build a model
customer profile to have a clear idea of how and where to find them. Here are some tips:
Create a focus group
Think back to when friends and family suggested that you had a sellable product, and you began to wonder if they were right. You may have thought, “Okay, everybody who tries it likes it, but would they pay for it?” It’s time to ask.
Because they’re interested in your product, your friends and family can be part of your first target audience. Conduct taste tests and ask for detailed feedback about what specifically they like and anything they might adjust about flavor, texture, smell, consistency, color, etc. What about the ingredients? Do they have concerns or preferences about local sourcing or sustainable packaging? Are they focused on allergens or calorie count? Does the product require education about what it is or how to use it? Think about the branding and product name and ask for feedback as part of this early testing process.
Next, widen your group to get a broader range of feedback. Track information about their
location, age, and gender. Get more specific with their income, shopping habits, and how much they spend on related products. As much as possible, also note what they read, their preferred social media networks, and the kinds of websites they visit. Knowing where they shop and find information may present promotional opportunities.
Create a focus group by reaching out to these friends and family by phone or email. Consider using a free online survey tool, such as Google Forms or SurveyMonkey. These tools allow your respondents to remain anonymous, encouraging them to be as honest as possible and make it easy for them to provide feedback. The responses can be turned into data to help refine the product and develop your brand story. Present your focus group with questions similar to these:
1. Where do you typically shop for food: farmers markets, independent specialty food
stores, natural grocery stores, conventional grocery, or online?
2. To understand their motivation when purchasing, ask how important is: locally made,
locally sourced, sustainable packaging, price, value, and nutritional profile?
3. Do you like the product? Please explain why. Be sure to provide respondents with
options, such as because of the taste, nutritional value, locally sourced, etc.
4. Would you buy this product? If so, how much would you be willing to pay?
5. How would you use it?
6. How often do you think you’d purchase/use it?
7. Would you purchase it as a gift for someone?
8. What kinds of stores would you expect to find this product in? What part of the store
would you expect to see it?
9. Would you order it online?
10. Do you currently use a similar product? Would you switch that product out for this one?
11. If you answered yes to using a similar product, how often do you use it and how much
does it cost?
12. How does the product taste? How does the taste compare with competing products?
13. To get feedback on packaging or branding, ask about your logo (if it’s been developed),
company and product name, label design, etc.
After the survey is complete, consider what you know about the people in your focus group. Are they gourmet cooks or hurried parents looking to make life easier? Do many kinds of people like your product, or does it require a more sophisticated palate? Where do these people shop? Is it an alternative to a mass-market product they already use? Keep going until you’ve looked at your product from many points of view.
Do your own comparative research. Who has a similar product or one that is close to what you’re developing? Buy, taste, and learn everything you can about any competitors. How did they start? How long have they been in business? Where is the product sold? What is the price?
Perform further research
Study consumers who buy foods like yours. Visit a library to access subscription-based business databases that provide information on consumers and their spending habits. A reference librarian can point out the most helpful databases. Some libraries also allow access to their databases from home with a valid library card and internet access. Also, research alternate markets for your product. For example, many restaurants and cafes do not make their own baked goods or desserts. Could selling wholesale be a viable sales channel?
Industry research
Once you’ve prioritized your primary audience, study the category of your food product. Attend trade shows. Find recent newspaper, magazine, and online articles about overall food trends. Then search for information focusing on your type of product.
The Specialty Food Association has a trends section on its website. A Google search for “food trends” will result in articles from reputable sources, such as the Food Network, Eater, and Food & Wine. Also look for trends information at Project NOSH/BevNet, Independent Natural Food Retailers Association, Food Dive, and Food & Tech Connect.
Consider setting up a daily Google alert to keep up to date on relevant trends and product articles. Social media can help you stay in-the-know. Follow chefs, retailers, and affinity groups.
Visiting stores and performing competitive analysis
Your focus group has been asked to name where they’d expect to find your product. Visit as many of those places as you can. Look at the products they sell. Take note of what people are purchasing. This research will help you find out if there is an existing or emerging market for your product.
The next step is to do a competitive analysis. Look for products like yours. Using a spreadsheet, note the date of store visit, competitor’s name, product line, price, ingredients, nutritional information and claims, portion size, shelf location in the store and the space allotted to it, package size, packaging material (type, color, style), product description, sell by date, retail name, and location. Write down any promotional materials being used such as free samples, floor stickers, coupons, aisle displays, and other in-store advertising.
Other things to note:
● Is the product placed with other similar products in one of the aisles?
● Is it merchandised near complementary products, for example, spice rubs near the meat
counter, or crackers next to the cheese display? If refrigerated or frozen, does the
location in the store vary? For example, some refrigerated salsas can be found in the
case near the produce, while others are in the grab-and-go section.
Shared-use kitchens CommonWealth Kitchen and the Western MA Food Processing Center ask their entrepreneurs to complete a simplified business plan using the LEAN canvas. This one-page business tool asks you to consider who your customer is and why your business will be successful. You can also hire a consultant to conduct a feasibility study.
Take time to fine tune your product, identify the market niche, test and adjust recipes and formulations, and refine packaging and distribution strategies. Each step is valuable for determining the likelihood of profitability. This research will also help with developing your sales pitch discussed in Chapter 9.